Why A Reliance-Disney Deal May Attract CCI Glare

One of the biggest media consolidations is said to be underway in India as Walt Disney Co. is in talks to merge its India business with Reliance Industries Ltd.'s media unit.

Mukesh Ambani-controlled Reliance's media unit is expected to own at least 61% in the merged company, with Disney holding the rest, Bloomberg reported quoting unnamed people. While exact details of the deal are still unknown, the combined entity could still end up cornering around 40% of the Indian media market.

Such a large deal in one sector, potentially creating a "duopoly", can affect advertisers and draw scrutiny from the Competition Commission of India, according to media expert and author Vanita Kohli Khandekar.

NDTV Profit spoke with Khandekar to understand what a potential deal could mean for the Indian media landscape.

The valuation of Hotstar was around $10 billion and there is speculation that the merger with Reliance could be settled for around $4–5 billion, which is a huge discount and a bargain for Reliance, according to Khandekar.

The $4–5 billion valuation (about Rs 33,000-41,000 crore) is not for Disney Hotstar but for Disney India, which has a top line of Rs 18,000–20,000 crore, she said.

The biggest chunk of Disney’s business is broadcasting, she said, adding that it's line with the fact that half of the $25-billion media business in India revolves around broadcasting.

“The valuation for the earlier deal, when Disney bought Fox and Star India and went into the Disney fold, was around $13–15 billion," she said. Citing reports that said Reliance will own 60%, Khandekar said whatever that 60% amounts to in the $4 billion is a fantastic deal “because you have one of the best broadcast assets in the country along with a couple of nice growth pivots in the streaming business and in film studios".

“Together, in Viacom 18 and Disney India, you (Reliance) have a company that has 32% of the TV viewership share in India...," according to her. "You also have 316 million unique users if you combine Jio Cinema, Voot (Viacom) and Disney Hotstar, although Hotstar has not been doing well ever since IPL was off the streaming platform.”

This number is only second to YouTube, which has around 465 million unique users.

According to Khandekar, there is worry, especially among buyers advertising space, because India has always been a buyers’ market as far as media is concerned.

“Google and Meta are huge; 80% of the digital advertising in the country and 70% of digital advertising globally goes to Google and Meta.”

“Sony-Zed’s consolidation was imperative, because you cannot fight the might of Google and Meta without scale or capital," Khandekar said. "Reliance is a great partner for Disney to have in India. Strategically, the merger makes sense; however, from a consumer and advertising perspective, there are several red flags."

Citing her conversations with an analyst, she said this level of consolidation is not seen anywhere in the world. One advertiser even went on record and said this creates a duopoly-like situation, she said.

The question remains if they will get the green flag from the Competition Commission of India "because this is like creating a semi-monopoly of sorts, which should worry the advertisers". The CCI, however, may not be an insurmountable hurdle, according to her.

“In the Sony-Zee deal, Zee had to shut down its channels to meet the compliance of the merger, like Big Magic and Big Ganga," Khandekar said. "Similarly, Reliance and Disney will have to walk the same path, pare down some businesses, get out of markets to reduce their viewership share and hold over the markets. If you have more than one-thirds share of the TV viewership, the CCI will insist on paring down a bit.”

Watch the full interview here: